Until recently, the conventional wisdom was that China’s contribution to global reflation would be increasingly accompanied by those of the US and Europe. Yet, the realities may look grimmer than anticipated. Usually, the term ‘reflation’ is used to describe the first phase of economic recovery after a period of contraction. More recently, ‘global reflation’ has …Read More »
Articles by Dan Steinbock
photo: IoSonoUnaFotoCamera Washington is planning to extend sanctions against Russia, once again. Meanwhile, the Trump administration is getting ready to cope with a special counsel’s investigation which seems to focus as much on Trump as Russia. Last Wednesday, Secretary of State Rex Tillerson warned that Congress should not pass any legislation that would undercut “constructive …Read More »
photo: Global Panorama The Vienna agreement among OPEC and non-OPEC oil producers will extend oil cuts by nine months. After the deal, oil price plummeted by about 5 percent. Far more is needed to subdue new economic uncertainty and market volatility. Among the oil insiders, the decision to extend oil production cuts was seen as a …Read More »
photo: Kenny Cole Recently, President Trump signed his “Buy American, Hire American” executive order. Ironically, while the stated goal is to put “America First,” the White House may actually subsidize old industries and undermine innovation. Recently, President Trump traveled to Wisconsin to sign the “Buy American, Hire American” executive order, which seeks to crack …Read More »
photo: Jonathan Taglione By the early 2020s, rivalry for industrial innovation will accelerate between the U.S. and China. Ironically, the Trump White House has opted for a poor-economy industrial policy, whereas China has a rich-economy policy. The former seeks past glory; the latter cannot wait to get to the future. According to the Trump administration, …Read More »
photo: Tecnalia Chinese robotics is positioned for leadership in global robotics, as the emerging industry is moving toward increasing rivalry and consolidation. In the new and emerging industry, the rise of innovative robotics startups heralds the future. In 2016, almost 130 companies were funded by venture capital, including China-based RooBo, Israeli Roboteam, and German ReActive Robotics. …Read More »
photo: Nathan Hughes Hamilton In France, President Hollande’s utter failure to foster broad consensus for structural reforms has paved the way for a contested election. While public debate focuses on Emmanuel Macron as the savior of France, the real story is that Marine Le Pen’s agenda has shifted the French political landscape. Before TV debates, the …Read More »
Photo: Dirk Dallas
As world trade and investment have plateaued, globalization has ground to a halt. The timing could not be worse for the Trump tariffs.
In the recent Central Economic Work Conference, stability became the common denominator for China’s economic planning in 2017. And next year, the new central committee will is likely to speed up the reform push toward the late 2010s.
Meanwhile, President-elect Donald Trump chose Peter Navarro, a long-standing China basher, to head the newly-created National Trade Council. Concurrently, the Trump team proposed a 10% import tariff, which is likely to trigger a trade conflict between US and China – and many other nations.
Starting in January, the US-Chinese goals will diverge in a way that has not been seen since the 1970s.
Massive monetary stimulus, but no pickup in trade and investment
At the peak of globalization, the Baltic Dry Index (BDI) was often used as a barometer of international commodity trade. The index soared to a record high in May 2008 reaching 11,793 points. But as the financial crisis spread in the advanced West, the BDI plunged by 94% to 663 points.
As China and other large emerging economies chose to support the ailing advanced economies through G20 cooperation, the US, the EU and Japan pledged they would accelerate reforms in global governance.
Photo: Kurtis Garbutt
Recently, foreign holders of US treasuries have been dumping their holdings more and at record pace. Optimists see it as a temporary fluctuation. Realists warn about structural change.
According to US Treasury data, major foreign holders of US treasury securities have been reducing their holdings by almost $250 billion since March. The pace of dumping has intensified with some $200 billion reduced in just past two months.
In the process, Japan has surpassed China as the major holder of US treasuries for the first time in nearly two years. While the mainland still has some $1,116 billion in US treasuries, it has reduced its holdings by $130 billion in just a year, along with Saudi Arabia ($18 bn), Russia ($13 bn), Turkey ($9 bn), and Norway ($18 bn).
What’s going on?
Temporary glitch or structural change
While some argue that the reductions by foreign holders only reflect seasonal fluctuations, this may no longer be true. Until recently, foreign holdings of US treasuries climbed steadily peaking at $6.280 trillion last June. Since then, they have declined by almost 4 percent (or $240 billion).
Indeed, some observers argue that US treasuries have never been sold so aggressively over a 12-month period.
Photo: Ewan Topping
After the UK Brexit and the Trump triumph in the US, the rise of anti-establishment Italy is hardly a surprise. It is the effect of half a decade of failed austerity doctrines in Europe and decades of failed political consolidation in Italy – ever since the notorious Tangentopoli scandals.
While Italy’s constitutional referendum heralds a political earthquake that will eventually affect both France and Germany, the immediate result is more uncertainty in economy, political polarization and market volatility.
End of an era in Italy – and Europe
Only hours after Italians had casted their ballot in the referendum on constitutional reforms, Prime Minister Matteo Renzi announced his resignation after heavy defeat.
Renzi’s ‘Yes’ camp included most of his Democratic Party (DP) and centrist allies, and the tacit support of moderate voters, including some from Silvio Berlusconi’s Forward Italy (FI). In turn, the opposition lineup featured Beppe Grillo’s Five Star Movement (M5S), the regional Northern League (NL) led by Matteo Salvini in alliance with the far-right Brothers of italy’s (Fdl) and Berlusconi’s Forward Italy (FI), a significant minority of PD allies, a number of small leftist groups,
According to projections, almost 60% of voters rejected constitutional changes. “My government ends here,” said Renzi from Palazzo Chigi.
Photo: Dirk Dallas
Right after the Asian-Pacific nations embraced the dream of free trade in the regional Peru Summit, President-elect Trump buried it.
Last weekend, Asia-Pacific Economic Cooperation (APEC) summit made it clear that it would move forward with trade pacts; with or without the US.
Right after the Lima summit, President-elect Donald Trump unveiled his plans for the first 100 days in office, which focus on campaign promises that will not require congressional approval. Among his first actions, Trump said he would “issue our notification of intent to withdraw from the Transpacific Partnership” and replace it with negotiating “fair bilateral trade deals.”
Trump campaigned on a promise to halt the progress of the TPP trade deal. The world is different after his triumph – including world trade.
From Berlin Wall to Trump Wall
In the late 1980s, as the Cold War eclipsed in Europe and regional trade blocks surfaced around the world, Australia called for more effective economic cooperation across Asia Pacific, which led to the first APEC talks.
In Washington, neither Asia nor APEC was yet a priority. Rather, the focus was on the North American Free Trade Agreement (NAFTA), which would tie together the economies of the US, Canada and Mexico. “We have got to stop sending jobs overseas,” warned presidential candidate H. Ross Perot in 1992.
Photo: Gage Skidmore
The Trump victory was a “stunning surprise” to Washington and mainstream media. But it was very much in line with voter distrust in both Clintons and Washington’s ruling class.
Politically, Americans are fed up. In cooperation with the Democratic National Committee, the Clinton campaign had far too cozy ties with Wall Street, neoconservatives and Pentagon contractors, as well as mainstream media organizations; from CNN and New York Times to Huffington Post and Google.
n turn, House Republicans demand a special prosecutor to investigate the Clinton Foundation, which former New York City mayor and Trump supporter Rudy Giuliani has called a “racketeering enterprise” that should be prosecuted as such. Indeed, Republicans have promised to investigate the role of the State Department, the Department of Justice and the FBI. In turn, Speaker of the House Paul Ryan has promised “aggressive oversight work” of a “quid pro quo” deal between the FBI and the State Department over emails, while chair of the House Oversight Committee Jason Chaffetz has been pushing for “new hearings.”
It will be interesting to see whether Republicans will walk the talk – unless, of course, the idea of “post-election healing” is understood as a license for collective amnesia.
After the bizarre 2016 election, Washington faces a slate of investigations and a gridlock. Internationally, threats include new Cold War(s). Depending on the outcome, the election could even be contested.
If Hillary Clinton wins, she will flash her broad smile like Alice in the Wonderland, with Vice President Tim Kaine, Bill and Chelsea on her side. The conventional story will be that her victory built on her egalitarian economic policy, gender concerns, international relations, strong defense policy and good ties with Europe and Japan.
But that’s just the facade – a carefully orchestrated result of an estimated $6.6 billion elections, her $700 million campaign financing, good ties with super PACs, skillfully maneuvered electoral college, shrewd PR, collusion with nation’s leading media organizations, and a long series of political miscalculations by Donald Trump.
Americans will vote on November 8. However, the battle will ensue soon thereafter. The winner will face a split Congress, a divided Democratic Party , and badly-fragmented Republican party. To defuse their meltdown, Republicans are likely to challenge Clinton every step of the way. And the election could – and perhaps should – be contested.
Photo: Dirk Dallas
In the coming years, China and India must decide whether their bilateral ties will be based on economic cooperation, political facilitation and strategic trust – or economic walls, political barriers and strategic containment.
In early October, militants attacked an Indian army camp in Indian-administered Kashmir, killing a soldier. In this contested region, the two nuclear powers, India and Pakistan, have occasionally been close to devastating military friction. In the mid-October BRICS Summit, India’s Prime Minister Narendra Modi called Pakistan “mother-ship of terrorism.”
However, fringe groups went further and a unit of the Indian right-wing Hindu nationalist organization, Vishwa Hindu Parishad, torched a pile of 200 Chinese-made electronics in West Bengal. For now, opportunistic political attacks remain marginal but there are concerns that determined fringes could aim higher. In turn, these efforts are compounded by past mistrust on the quality of some Chinese goods, and deliberate hoaxes.
Today, China is India’s largest trade partner. However, New Delhi has a huge trade deficit with China, which many Indians also perceive as the key partner of Pakistan.
Photo: Allan Watt
According to the third-quarter data, China’s economy grew 6.7 percent for a third consecutive quarter. Critics claim otherwise. Yet, the real disagreement involves business cycles and secular trends.
China’s sequential growth is now at 7.2 percent; fastest in three years. Manufacturing and service sectors may have bottomed around 2015/16 and have risen since, while consumer price inflation rose to 1.9 percent last month. After seasonal adjustments, exports and imports reflect stabilization as well.
Beijing’s effort to rebalance the economy toward consumption and innovation has begun. In the first three quarters of the year, consumption accounted for 70 percent of GDP growth, almost twice as much as 37 percent attributed to investment.
Yet, skeptics argue that surging debt and property markets undermine stabilization.
In August, Harvard economist Kenneth Rogoff sent grave warning about China’s economy and its effects toward the world. As a former IMF chief economist and the co-author of a 2009 bestselling debt analysis, Rogoff and his comments carry weight in markets.
Rogoff builds his case on the debt-to-GDP gap. This ratio was developed after the global crisis to quantify ‘”excessive credit.” Large gaps (China’s exceeds 30 percent) have been found to be an early warning indicator of banking crises or severe distress.
Photo: Vince Alongi
In advanced and emerging economies, preferences for either Clinton or Trump differ based on the candidates’ views on trade, the economy, and foreign policy doctrine. Though Clinton is the preferred candidate in most areas, whoever the next U.S. president is will face – and may contribute to – significant challenges on several continents.
In major advanced economies, Clinton is seen as President Obama’s only feasible successor, whereas a Trump presidency remains unthinkable. In large emerging economies, many expect Clinton to win but expect assertive US policies — irrespective of the election outcome.
Brussels: Choose Clinton
Since 2008, Europe has been swept by Brussels’s misguided fiscal austerity and the European Central Bank’s (ECB) monetary ‘Japanization,’ a huge immigration crisis, the impending Brexit, and anxiety about Italy’s impending constitutional referendum – to mention a few.
Amid its malaise, Brussels sees former Secretary of State Hillary Clinton as America’s only viable president. Conversely, a Trump White House would boost the Euro-skeptic oppositions in the EU core economies, which the Euro federalists see as the last nail in the coffin for the EU.
After one of the most degrading races in postwar history, US presidential campaigns are getting still dirtier. But will US-China relations change?
As Wikileaks has disclosed information about Hillary Clinton’s email and Benghazi scandals and deep ties with Wall Street, her campaign, with its cozy media relations, is promoting Donald Trump’s obscene tapes and comments on women.
In the first US presidential elections that have been “Kardashianed,” Clinton has a 5-10% lead against Trump. However, US electoral college is ruled by winner-takes-all principles, which give Clinton about 260 and Trump about 165 electors, respectively, while some 115 remain undecided. They are the ones Clinton and Trump are now courting – with big money.
After marginalizing her Democratic center-left opposition, Clinton’s campaign has raised almost $375 million, plus $145 million from big lobbyists. In contrast, Trump has failed to unite the party behind his campaign. As a result, he has raised less than half of Clinton’s total and is shunned by most big donors.
Clinton’s America: Sticks, carrots – and sticks
According to US-based Pew’s survey, the Chinese are divided about Hillary Clinton. More than a third have a favorable view of her, another third has an unfavorable opinion, and the rest has no view.
Photo: Craig Engleson
On October 1, the Chinese renminbi officially joins becomes the fifth international reserve currency. Until recently, Washington played geopolitics to defer the renminbi’s internationalization. But what about Wall Street?
On October 1, 2016, the Chinese renminbi (RMB) will officially join the International Monetary Fund’s (IMF) international reserve assets; that is, the SDR (Special Drawing Rights) basket. From the perspective of the IMF, this is a ready affirmation of China’s success in opening up its markets. The inclusion of the renminbi into the ranks of the most important international currencies codifies the acceleration of bilateral and multilateral RMB transactions worldwide.
As almost a year has passed since the IMF’s decision, the U.S. has finally, though quietly and belatedly, begun to participate in the RMB internationalization. Nevertheless, as the RMB’s expansion is rapidly accelerating, Wall Street’s moves are still too little too late.
Three waves of capital inflows
After October 1, RMB asset are likely to benefit from three consequent waves of capital inflows. The first wave involved the very inclusion of the RMB among the IMF international reserve assets. That caused a re-weighting of the SDR basket, which is currently valued at $285 billion. Before the RMB inclusion, the basket was dominated by the U.S. dollar (41.
Photo: Jordon Cheung
Japan’s monetary gamble and Abenomics are approaching the end of the road. Neither Brussels nor Washington is immune to the adverse consequences of Tokyo’s monetary exhaustion, says Dan Steinbock.
Recently, Japan’s second quarter GDP growth was revised up to 0.7 percent, after four consecutive quarters of stagnation. But don’t set your hopes too high.
More than three years ago, the conservative caution of the Bank of Japan (BOJ) Governor Masaaki Shirakawa faded into history as his successor Haruhiko Kuroda pledged to do “whatever it takes” to achieve the 2 percent inflation target. Yet, today inflation remains close to zero and Japan’s stock market is down 13 percent.
Irrespective of the outcome of its recent meeting, the BOJ can only postpone the inevitable. Nevertheless, cyclical fluctuations in Japan or elsewhere will in no way mitigate secular challenges.
Failure of monetary gamble
Under Kuroda, the BOJ has boosted quantitative and qualitative easing with negative interest rate policy. Base money and the central bank’s holdings of Japanese government bonds (JGBs) each have swollen to almost ￥400 trillion ($3.9 trillion), which is now 80 percent of the country’s GDP, and they continue to expand at a pace of￥80 trillion ($780 billion) annually.
Photo: David Clow
Today, advanced economies blame China for steel overcapacity. In reality, four decades ago Washington and Brussels opted for bad policies, which China seeks to transcend.
In the G20 summit in Hangzhou, some world leaders had harsh words for China’s steel overcapacity. Before the summit, President Barack Obama was urged by US lawmakers, unions and trade associations to blame China’s trade practices for US mill closures and unemployment and to stress the need for “aggressive enforcement of US trade remedy laws.”
In Brussels, European Commission president Jean-Claude Juncker seconded US concerns. In Canada, steelworkers and producers pressed Prime Minister Justin Trudeau to push China for the same reasons. In Japan, Prime Minister Abe called for structural reforms to address China’s steel overcapacity.
Yet, as history shows, the first major steel crisis occurred already in the 1970s, starting in the US and Europe.
The postwar steel crisis
Since the postwar era, crude steel production has grown in three quite distinct phases. In the postwar era – often called the “golden era” of the advanced economies – global steel production grew an impressive 5 percent annually. It was driven by Europe’s reconstruction and industrialization, and catch-up growth by Japan and the Soviet Union.
In Hangzhou, China began the push for G20 to overcome protectionism and fuel global growth prospects. That is vital to reverse stagnation in advanced economies and slowdown in emerging nations.
On September 4-5, the leaders of the G20 economies met in Hangzhou. The summit had great symbolic importance that was easily understood in emerging economies but largely ignored in advanced economies.
Although economic gravity has been in emerging Asia for decades and the emerging world has fueled global growth prospects for nearly a decade, this was the first time that the G20 truly met in the territory of the future.
Nevertheless, international media, which remains headquartered in rich economies, focused on the sensational, whether it was a misreported snub of President Obama, speculative rumors about diplomatic jostling, inflated hopes associated with bilateral meetings, or British Prime Minister Theresa May’s red suit.
In reality, the G20 summit was set to achieve two main objectives.
Overcoming protectionism in the short-term
The G20 final communiqué focused on struggle against tax evasion; accelerated efforts to push international trade and investment; fiscal stimulus and innovation to boost economic growth; and strengthening support for refugees. Indeed, Hangzhou sought to reverse was the eclipse of global economic integration.
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As China assumes leadership in the grouping, Beijing wants greater role to Africa and developing world in the G20.
When China’s Foreign Minister Wang Yi spoke in the Hangzhou Summit in May, he made it clear that Beijing intends to cooperate with other G20 countries to deliver ten outcomes. One of these focuses on Africa.
As the G20 host, China’s goal is to “initiate cooperation to support industrialization of Africa and least developed countries (LDCs).” Wang added, “This year, China will encourage G20 members to help Africa and LDCs speed up industrialization, reduce poverty and pursue sustainable development by means of capacity building, investment increase and infrastructure improvement.”
After seven decades of promises by major advanced economies, it is hardly a surprise if Africans feel somewhat wary about such pledges. However, this time may prove different.
Africa’s role in the G20
Currently, South Africa is the only G20 member from Africa. However, China wants Africa to have a greater role in the grouping and to institutionalize that role.
The new Philippine president is waging a tough drug war, pushing economic growth domestically and greater pragmatism in foreign policy that could contribute to Southeast Asia’s future.
Internationally, Rodrigo Duterte, the new president of the Philippines, has been portrayed as a “dangerous populist”. That’s a gross caricature. In the elections, he leaned on the nationalistic, social-democratic PDP-Laban (lit. Philippine Democratic Party-People’s Power). He is a tough pragmatic realist who focuses on actions and results, not talks and formalities.
After two decades as Mayor of Davao, the country’s second-largest city, Duterte won the elections with a tough stand on crime. He has a track record. When he took over in Davao in the 80s, it was regarded as a dangerous economic backwater. Today, the city is booming and crime is down. Now he would like to “davao” the nation.
True, Duterte’s macho rhetoric tends to blur the substance of his actions. Sheer authority earns his respect. Allegedly molested by a priest as a boy, he has been vocal for the rights of women, and ethnic minorities, including Muslims. He wants to unleash inclusive growth in the Philippines. He supports the US-Philippine alliance, but would lean more toward China and does not believe Washington would honor its defense obligations.
Photo: Getty Images
According to polls, the race to the White House is over. Clinton has won, Trump has lost. If that proves the case, US economic erosion will slow but imperial foreign policy may escalate, which has critical repercussions in Asia.
The polls reflect the new status quo. Despite her high unfavorability ratings, Clinton now has the support of every second registered voter, whereas Trump, with his high unfavorability ratings, can rely only on every third. As a result, Clinton’s likely voters nationwide amount to 45-50 percent, as against Trump’s 35-40 percent.
Campaign financing tells the same story. By early August, Clinton had raised $365 million in big money financing, almost a third of it outside money. In contrast, Trump had barely $100 million, only a tenth of it outside money. Four of every five dollars in the Clinton campaign has come from large corporations and Wall Street, big lobbyists and big unions, not ordinary Americans.
How did we get here?
By suppressing the dissent of Bernie Sanders’s center-left opposition in the Democratic convention, Hillary Clinton consolidated leadership, while attracting some dissatisfied Republicans and Reagan Democrats who favor hawkish foreign policy but progressive social policy.
Photo: Davide Oliva
Europe’s Summer of Discontent
In the aftermath of the Brexit tensions, Italy is defying Brussels to bail out troubled banks and preparing for constitutional referendum in October. If Prime Minister Matteo Renzi fails to achieve adequate support, economic destabilization will shift from the UK to Italy – which could pave way to the rise of anti-establishment left or right.
“Thank you Great Britain, next it is our turn,” tweeted Matteo Salvini, the leader of the right-wing Northern League (NL), a major Italian center-right opposition party. Meanwhile, ex-Prime Minister Silvio Berlusconi has anointed Stefano Parisi, a former Internet executive and government economic advisor, as his political heir, giving him a mandate to reconsolidate Italy’s fragmented center-right, starting with Berlusconi’s own Forza Italy (Go Italy!) party.
Along with radical right, Euroskepticism has been on the rise in Italy as elsewhere in Europe. Until recently, Italy saw itself as part of an integrated Europe, but that was before the immigration crisis and continued economic stagnation – both of which are attributed to Prime Minister Renzi by Italy’s radical right and left.
“Whether you like it or not, the British people have chosen,” said Alessandro Di Battista, after the UK’s Brexit referendum.
As non-traditional monetary policies in advanced economies are likely to eclipse, investors will increasingly turn to gold to hedge their portfolios.
Around mid-April, when the price of gold was still about $1,290, I made a contrarian projection that gold had a bright, though bumpy future. Since then, gold price has climbed to $1,365 – which translates to 6% in just one quarter.
In fact, gold has barely started its climb and is likely to exceed $1,400 by the year-end – and that’s only the beginning.
Gold’s reality check
Between fall 2011 and fall 2015, gold suffered the most challenging losses since 1999, plunging nearly $1,880 to $1,060. So a quarter ago, the conventional wisdom was that US rate hikes would ensure gold’s further decline. However, if that’s the case, why did gold prices soar during the first quarter of 2016?
At the turn of 2015, gold’s plunge was still driven by the broad commodity sell-off, especially the drastic plunge of oil prices that was fueled by the stronger dollar, along with concerns over China’s growth deceleration. Many observers thought that gold’s decline would be sustained as the Fed’s rate hikes were ahead, oil prices would linger, US dollar would strengthen, and China’s growth deceleration would worsen.
Photo: Thomas Depenbusch
Assuming no surprises in the second half of the year, China’s growth in 2016 will remain near the target of 6.5 percent reflecting structural transition in the mainland, secular stagnation in the West and post-Brexit tensions globally.
In mid-July, China’s second-quarter GDP figures beat estimates with a 6.7 percent expansion, thanks to support by a slate of stimulus measures from the government and the central bank.
In the next two quarters, China’s growth is expected to decelerate to around 6.5 percent or less. In annualized figures, the quarterly data indicates an expansion of nearly 6.5 percent, which remains close to the ambitious target of 6.5-7 percent. At the same time, the consumer price index (CPI) is likely to increase to 2.5 percent.
Diminished global prospects
Since early spring, policymakers have opted for fiscal and monetary stimulus, particularly to support property markets which have fueled home prices, while contributing to construction, employment and stability.
However, the central government is between a rock and a hard place, thanks to diminished global prospects.
In the US, fiscal conditions have tightened and rate hikes remain on hold. In Europe, expansion relies excessively on central bank’s quantitative easing and ultra-low rates.
Photo: Global Panorama
As Nigeria’s economy is contracting, domestic and global headwinds ensure that downside risks will escalate. Without aggressive economic moves and harsh security measures, the economy could face a disastrous free fall.
In 2015, government deficit soared to almost 4 percent of GDP and exports fell 40 percent, which led to a current account deficit of 2.4 percent of GDP. Unsurprisingly, foreign portfolio inflows froze as investors fled, with reserves falling to $28 billion at year-end 2015.
After mid-June 2016, the devalued naira plunged almost 30 percent to a record 282 per dollar as policymakers relaxed currency curbs, due to the looming recession. Since then, naira has fallen another 12 percent to 315 per dollar (while trading at 370 per dollar earlier). Devaluation is expected to go some way in alleviating foreign exchange shortage, but challenges to business activity will prevail and consumer confidence has been penalized.
Last year, Nigeria’s growth was more than halved to 2.7 percent. In the first quarter, the GDP contracted 0.4 percent. Recently, the International Monetary Fund (IMF) cut the country’s 2016 GDP growth forecast to -1.8 percent; the lowest in three decades.
As global prospects are diminishing, post-Brexit tensions will increase and the fall could witness new shocks in global markets, there is worse ahead.
After weeks of torrential rain across central and southern China, the mainland has suffered from a series of devastating floods. As the total price tag has soared, the impact will be felt in economic growth.
By mid-July, almost 240 people had lost their lives and nearly 100 were missing, as China’s floods had been compounded by Typhoon Nepartak and a violent tornado. Torrential rains affected 33 million people in 28 provinces, submerging huge areas of cropland.
Another round of heavy rain over the last week left some 200 people dead, including 130 in Hebei province.
One of the costliest weather disaster in history
Only days ago, President Xi Jinping emphasized the importance of early warning systems in flood-prone areas and warned officials about delays.
As the total economic toll is estimated at more than $22 billion, China’s devastating floods represent the 5th costliest non-US weather disaster on record. Only the 1998 floods, which resulted in losses of $44 billion (in 2016 dollars), have been more damaging.
Economic growth is very sensitive to adverse impact on roads, rails and other damage on supply disruptions, which can result in shortages. As transport infrastructure is paralyzed or impaired, factories close their doors in industrial provinces, along with offices in post-industrial cities.
Photo: U.S. Pacific Fleet
After the South China Sea arbitration ruling, uncertainty and friction may increase in the region. However, the economic promise of China’s rise and the Asian century will only materialize with peace and stability in the region.
On July 12, the international court in The Hague ruled in the dispute between China and the Philippines over the South China Sea. In international media, the ruling of the Permanent Court of Arbitration (PCA) has been characterized as a sweeping rebuke of Chinese claims in the South China Sea.
But in international relations realism, the ruling and its implications are inherently ambiguous, which means greater uncertainty and possible volatility in the region..
Legal ambiguity, policy realism
Despite the focus of the UN Convention on the Law of the Sea (UNCLOS), the PCA is not a UN agency, as the UN itself noted after the ruling. Nor is its ruling enforceable, even though it is likely to shape regional stances. Second, China refused to participate in the arbitration because, in Beijing’s view, the tribunal had no jurisdiction over the case. Yet, China resists militarization in the region and seeks cooperation with the members Association of Southeast Nations (ASEAN).